MOSCOW (Realist English). Russia’s metallurgical industry is going through one of the toughest periods in its recent history.
The results of the first quarter of 2026, which were actively reported throughout April, recorded a catastrophic drop in demand, a collapse in the profits of the largest companies and a swing of accumulated reserves into the red.
High interest rates, a contraction in the construction sector and the loss of export markets because of sanctions have brought the industry to a standstill – it has moved into survival mode. Investment projects are being curtailed, modernisation is being frozen and headcount is being cut.
Demand collapses to a 15‑year low
According to Rosstat and industry associations, ferrous metallurgy is showing a systemic demand crisis. In the first three months of 2026, steel consumption in Russia fell by 15% compared with the same period last year. This figure was cited by Severstal CEO Alexander Shevelev in the company’s first‑quarter report. According to him, the situation in the industry remains difficult and steel demand continues to fall.
Analytical agency MMI reported even more shocking data: in the most problematic segment – flat products – the drop in March was 15%, while long products fell by 12%.
According to a report by the CSR Investment Analysis Centre, domestic steel consumption fell by 14% in 2025 to 38.9 million tonnes – the lowest level since 2011. Moreover, derivative sectors (pipes, profiles, fittings) fell by 14% year‑on‑year – evidence that the crisis has affected the entire value chain.
Steel production: decline, capacity utilisation and NLMK’s record loss
For January‑February 2026 (more recent data have not been published), production of stainless steel rolled products fell 37.4% year‑on‑year (to 10,860 tonnes), long products fell 42.5%, and hot‑rolled flat products fell 47.5%. The only exception was cold‑rolled flat products (+15.5%). Experts at TsNIIchermet attribute this to the completion of large machine‑building orders amid a lack of new investment.
According to data from the Foreign Intelligence Service, the most alarming signal was the capacity utilisation of the Magnitogorsk Iron and Steel Works (MMK): it shrank to 60%.
At the end of April 2026, NLMK (owner Vladimir Lisin) unexpectedly announced that its RAS net loss in the first quarter had increased 4.8 times to 5.938 billion rubles, while revenue fell 11% to 145.5 billion rubles, even as the company continued to build up debt.
Profits of the largest companies: a 370‑fold collapse and ‘mothballing’
The first‑quarter 2026 results of the metallurgical companies, whose consolidated reports were released in the last week of April, shocked the market with the depth of the decline.
Severstal (owner Alexei Mordashov), which accounts for one‑sixth of Russia’s steel output, reported a net profit of 57 million rubles, 370 times less than in the same period last year (21.07 billion rubles). EBITDA collapsed 54%, and free cash flow turned negative – minus 40.37 billion rubles.
The company nearly exhausted its working capital: cash on hand fell from 38.4 billion rubles at the start of the year to 4.9 billion rubles by the end of March. At the same time, Mordashov’s fortune, according to Forbes, grew by 8.4 billion over the year to 37 billion, making him the richest businessman in Russia.
At the end of March, the company announced spending cuts: the repair fund was cut by 15%, capex by 24%. Salary indexation was cancelled, hiring was frozen, and construction of an iron‑ore pellet plant in Cherepovets was suspended.
MMK reported a net loss of 1.37 billion rubles (a year earlier it had a profit of 3.14 billion rubles). Revenue fell 18.6% to 129 billion rubles, and EBITDA margin was 6.7% compared with 12% for competitors. The company also cut steel production by 4.9% year‑on‑year and sales of premium products by 10.3%. Free cash flow turned negative (minus 14.1 billion rubles), depriving investors of dividends.
Exports: loss of European markets and infrastructure problems
Exports have been one of the main reasons for the decline in industry profitability. Until 2022, Europe accounted for up to 17% of Severstal’s shipments. Overall, Russian steel exports fell from 31 million tonnes in 2021 to 20 million tonnes in 2024‑2025. The ban affected up to 40% of Russian steel exports to Europe, or $9 billion in value terms. In response, the Russian government extended quota mechanisms and introduced new duties, but that did not solve the main problem – the profitability of sales to third countries.
Nevertheless, world steel prices showed some increase in the first quarter, mainly due to reduced shipments from China. An additional factor was the rise in freight rates caused by the Middle East conflict, which weakened competition from Chinese suppliers.
Metals prices
The only positive dynamic was a rise in prices in early April, recorded in the Central region of Russia. From 27 March to 2 April, the aggregate metal price index for ferrous rolled products rose by 5.23 points (+3.28%). The largest increase was for rebar (+3.28%); prices fell for only four product types, most notably for galvanised rolled products (–1.12%). At the same time, the average price of hot‑rolled sheet, according to Severstal CEO Shevelev, fell by 7% in the first quarter. This means that the small rise in early April did not offset the overall decline.
What is happening at the plants: deindustrialisation, bankruptcies and ‘invisible’ unemployment
The Russian Foreign Intelligence Service stated in a report that metallurgy is moving “from an optimisation stage to a conservation stage: capacities formally exist, but there is no modernisation, no repairs, no personnel” – which it sees as signs of hidden deindustrialisation.
According to available data, the industry is approaching a line beyond which irreversible changes begin. In the spring of 2026, a rapid winding down of non‑core assets began: the Vyartsilya hardware plant (part of the Mechel group) was shut down. Other small enterprises are next.
According to data from audit and control bodies, overdue wage arrears grew by 114% in the first quarter. NLMK reduced its share of white‑collar staff. MMK is preparing to cut 10% of its management staff. At the same time, official unemployment has not been recorded – workers are being moved to part‑time schedules.
Expert opinions and forecasts
Most experts polled agree that the bottom of the crisis will be reached at the end of the first or second quarter of 2026, and that demand will begin to recover as the key interest rate comes down.
Ivan Salkovsky, an analyst in the metallurgical sector at Euler, forecasts that steel output will gradually recover in 2026 to 69.0 million tonnes, and consumption to 40.5 million tonnes.
Dmitry Orekhov, Managing Director of the rating agency NKR, said: “Steel production for the year as a whole may be 13‑14% below the 2021 figure. In 2026, only a modest recovery is possible, and it may take years to return to pre‑crisis levels.”
Experts at BCS World of Investments confirmed a negative outlook for metallurgical company shares, warning that the industry crisis will continue to weigh on steelmakers and that profit declines will persist into 2026‑2027.
Steelmakers themselves expect weak demand in the first quarter and do not forecast any substantial recovery before the second half of the year.
Among the negative factors, experts highlight:
- The Central Bank’s tight monetary policy, which has crushed investment activity;
- Falling demand in construction and machine building, also because of the high interest rate;
- An overly strong rouble, which stimulates imports of finished products (primarily from China) and undermines the competitiveness of domestic consumers.
The only positive note is that Severstal has maintained almost 100% capacity utilisation (2.72 million tonnes of steel in Q1), which allows companies to preserve their workforce.
